BLM proposes revisions to commercial oil shale regulations to ensure fair return to taxpayer; will open 60-day public comment period

WASHINGTON – As part of President Obama’s strategy to continue to expand safe and responsible development of the nation’s energy resources, Secretary of the Interior Ken Salazar today announced the Department’s final plan for encouraging research, development and demonstration (RD&D) of oil shale and tar sands resources on Bureau of Land Management (BLM) lands in Colorado, Utah and Wyoming.

The Record of Decision and plan amendments make nearly 700,000 acres in Colorado, Utah and Wyoming available for potential oil shale leasing and about 130,000 acres available for potential tar sands leasing in Utah. In November 2012, the BLM signed two additional leases for RD&D oil shale proposals to encourage industry to develop and test technologies aimed at developing oil shale resources on a commercial scale.

“This plan maintains a strong focus on research and development to promote new technologies that may eventually lead to safe and responsible commercial development of these domestic energy resources,” Secretary Salazar said. “It will help ensure that we acquire critically important information about these technologies and their potential effects on the landscape, especially our scarce water resources in the West.”

As part of the Obama Administration’s all-of-the-above energy strategy, domestic oil and gas production has grown each year the President has been in office, with domestic oil production currently higher than any time in two decades and natural gas production at its highest level ever. Renewable electricity generation from wind, solar, and geothermal sources has doubled and foreign oil imports now account for less than 40 percent of the oil consumed in America – the lowest level since 1988.

Under the Record of Decision, the BLM-managed lands will be available for RD&D leases of oil shale resources. Eligible companies could convert to a commercial lease after satisfying the conditions of the RD&D lease and meeting basic due diligence requirements and clean air and water requirements. The plan issued today will amend ten of the BLM’s land use plans.

“The BLM recognizes the importance of taking a balanced approach to exploring the potential of our oil shale resources,” said Neil Kornze, BLM’s Principal Deputy Director. “This is a smart approach that will not only support companies as they work to determine if development is commercially and technically viable, but also yield the necessary information upon which broader scale commercial leasing could be based.”

The BLM will also begin soliciting public comments on proposed revisions to the commercial oil shale regulations. The proposed revisions are designed to ensure a fair return to the American taxpayer, encourage responsible development of federal oil shale resources, and evaluate necessary safeguards to protect scarce water resources and important wildlife habitat. The BLM is accepting public comments for 60 days following publication in the Federal Register, which is expected next week.

The proposed rule identifies several options for amending the royalty rates for commercial oil shale production. The BLM will consider whether to retain some flexibility to adjust royalty rates when more information is available about costs of production, energy inputs, and impacts associated with various extraction technologies.

The results of ongoing research and development activities combined with administrative flexibility in setting royalty rates will allow BLM to determine whether future applications to lease should include specified resource-protection plans and whether other aspects of the regulations need to be clarified.

Oil shale is a fine-grained sedimentary rock containing kerogen and is distinct from “shale oil.” The largest known domestic oil shale deposits are in a 16,000-square mile area in the Green River formation in Colorado, Utah and Wyoming. Oil shale can be mined and heated to an extremely high temperature (retorting) in aboveground facilities, and the oil can then be separated from the resulting liquid. Oil shale also can be subjected to extreme heat and pressure while in underground formations (in situ retorting) andthe resulting liquid pumped to the surface. The final oil shale plan examines surface mining with surface retort, underground mining with surface retort, and in situ retorting technologies.

Tar sands are sedimentary rocks containing a heavy hydrocarbon compound called bitumen, which can be refined into oil. Unlike the oil sands deposits in Canada, oil is not currently produced from tar sands on a commercial scale in the United States. U.S. tar sands are hydrocarbon wet, whereas the Canadian oil sands are water wet, meaning that U.S. tar sands would require different processing techniques. The final oil shale plan evaluates the potential impacts of various extraction methods for tar sands, including surface mining with surface retort, surface mining with solvent extraction, in situ steam injection, and in situ combustion technologies.